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Stainless steel: An international market perspective
Consider, if you will, the general consumer perception of a product which is not only aesthetically pleasing, but has a remarkable combination of properties, including high strength, durability, formability and resistance to corrosion, even in extreme conditions.
Consider also that such a product could be essential in many areas of everyday life, from cutlery and pots and pans to a wide range of home appliances; from restaurants to hospitals; from automobile exhaust systems to modern trains; from architectural designs to building and construction; from the storage and transportation of every conceivable type of liquid, including the more corrosive chemicals as well as liquids for human consumption; and from many different types of industrial plant and equipment.
If such a product could exist, one would imagine that it would be very highly prized and that its price would be beyond the reach of the everyday consumer.
But such a product does indeed exist and it is known by its generic name – Stainless Steel.
This innovative product was invented 100 years ago during two independent but similar experiments, one in Germany and the other in England, in which the metallurgical engineers were searching for a material which would be capable of resisting corrosive attack. They discovered that by adding a certain level of chromium to steel they could significantly improve its corrosion resistance and also make the steel more capable of withstanding wear and tear, because the chromium protective layers were able to ‘renew’ themselves even if the material became scratched or worn.
In the intervening 100 years great strides have been made in the development of stainless steels and a range of products is now available which can cover applications from the very attractive materials used in household kitchens right through to industrial materials that are used in high strength and high temperature applications.
This remarkable product has enjoyed unprecedented growth as demand has spread continuously with the ever-increasing identification of new ideas for its use and the development of new markets. In our daily lives we will encounter it in our kitchens; in the restaurants we visit; in the motor cars we drive or the trains or buses on which we ride; if we look inside our computers we will find that the hard disc drive covers are very likely to be made from stainless steel; if we need to visit a hospital we will find extensive use made of stainless steel – from the equipment used in the wards and operating theatres even to the very fine needles attached to hypodermic syringes. As we travel through cities and suburbs it is difficult to avoid the ever-present reminders of this wonderful material, from street furniture and statues to the cladding on escalators and elevators and to hand rails and lamp-posts.
The growth of stainless steels has been particularly impressive. It has outperformed the rate of growth of competing materials by a considerable margin and even in the face of the worst financial crisis the world has experienced since the Great Depression, stainless steel suffered only a temporary setback in 2009, before bouncing back strongly in 2010.
A special material
That is precisely what one would expect given the benefits provided by this very special material. And yet, the price of the material has been declining in real terms for many years and the Financial newspapers have reported relatively weak returns on investment from the producers of stainless steel in the past five years. It is plain that the profitability of this industry is currently in inverse proportion to the popularity of its products. There are different reasons for this phenomenon and there will be differing opinions. But it seems to me that the answer lies in an elementary understanding of basic economics. The interaction between supply and demand in a free market environment has always been a determinant of prices. Prices tend to vary until the supply of a particular good or service reaches a point of practical parity with the demand for that good or service.
I have mentioned that the demand for stainless steel has been growing strongly and that it has been out-performing competing materials over an extended period of time. But there has been a parallel and higher increase in its supply.
It is not within the brief of this article to comment on continuing investments into new capacity in these circumstances, other than to make the common-sense observation that, over time, markets will usually tend towards equilibrium. But there are two avenues which are open to the producers to counter the impact of increasing supply. One is to reduce the cost of production in order to remain competitive. A number of producers are actively pursuing this approach and many of them have shown very commendable results. But this industry has faced cost pressures for many years and there is a limit to what more can be done.
Another avenue is to increase the efforts to develop new markets for their products in order to accelerate the rate of growth of demand.
It is informative that the developing countries with the largest populations, notably China, India, Brazil and Indonesia, are among those countries with the lowest per capita consumption of stainless steel. That presents a very interesting challenge for market development and also gives some encouragement to the industry.
India, for example, has one of the most active and innovative Stainless Steel Development Associations in the world. Their work has borne very significant fruit in a relatively short time frame. A lot of work has recently been done on establishing a similar Market Development Association in China. There is significant scope for exchanging information and ideas among the various Development Associations in the world in order to transfer know-how about new applications from one market to another.
There is an active community among the Development Associations in the world today with annual meetings arranged under the umbrella of the International Stainless Steel Forum at which existing and planned development projects are openly and freely shared.
The easiest way in which to develop a new market is to copy an existing one and it is therefore refreshing to note the willingness of the innovative people in this industry to share their ideas and their practices.
The key to the future stability of the stainless steel industry lies in increasing the focus on maintaining and defending existing markets and re-doubling the efforts on developing new markets. The capabilities of stainless steel are clear for all to see – what is required is the ingenuity of people to find new ways of promoting new markets whilst taking care to defend existing markets from competing materials.
About the ISSF
The International Stainless Steel Forum (ISSF) is a non-profit research and development organisation which was founded in 1996 and which serves as the focal point for the international stainless steel industry. ISSF now has 65 members in 25 countries, collectively producing 80 per cent of all stainless steel.
Visit www.worldstainless.org for further information.